Is Your Tax Return Being Prepared Overseas? Here’s How to Protect Your Data

Today, I want to share a dirty little secret with you.

It’s about the tax preparation industry, and it’s something that could directly impact your private personal information.

Last year, I met Sarah, a single mother. She handed over her tax documents to a tax company she thought she could trust. She gets her tax return prepared. Everything seems fine. But a few months later, she discovers that her identity had been stolen.

This may or may not have been the reason, but she did some digging and found out that her personal information was actually sent overseas to a foreign country by her tax preparer company for someone else to prepare.

Although she can’t prove it, she strongly feels that her private information had been compromised through the tax prep company that hired an overseas firm to prepare her taxes—without her knowledge.

Are Tax Returns Really Being Sent Overseas?

Yes, that’s right.

Many US companies right now, possibly even your tax preparer, are offshoring their work to countries like India and the Philippines. And while there’s nothing inherently illegal about these business practices, they actually need your consent to do this.

But, and this is a big but, it’s often buried in a pile of paperwork that most of us never read thoroughly.

So today, we’re going to break this down. What does this mean for you? How can you protect yourself? And why is this such a big deal?

Let’s get into it.

Why Are Companies Sending Tax Prep Work Overseas?

There’s talk of an accountant shortage in the US. Fewer students are choosing accounting as a career, and there’s a real need for skilled professionals.

But let’s be real—many businesses see accountants as a cost center. When it’s time to cut expenses, labor costs are the first to go under the microscope.

The reality is that accountants in the US often aren’t paid in line with the high-stakes and complexity of their work. If there’s a large refund, great job. If there’s a large tax due, people assume the accountant must have done something wrong.

Instead of raising salaries to attract more talent, some companies look for a cheaper solution—offshoring.

What Does Offshoring Mean for You?

Offshoring means outsourcing work to workers in other countries where labor costs are significantly cheaper. With advances in technology, a company in New York can hire a tax preparer from the Philippines or Bangladesh at a fraction of the cost.

From their perspective, it makes economic sense. Why pay an accountant in the US $100,000 a year when they can get the same work done for $20,000 overseas?

Personally, I’ve heard that the quality of work from offshoring is lacking. So I guess it’s true what they say—you get what you pay for.

But here’s what often gets overlooked:

Your sensitive financial data is now being handled in a foreign country, potentially subject to different privacy standards, different regulations, and different ethical standards.

This practice is legal, but it requires your explicit consent. That’s where IRS Form 7216 comes in.

What Is IRS Form 7216?

IRS Form 7216 is a required form that you probably signed without fully understanding its implications. This form allows your tax company or preparer to send your information overseas.

Let’s be real—when your tax pro (or any professional, for that matter) has you sign stuff, most of us just skim through it, not fully understanding what we’re agreeing to.

In this case, you’re agreeing to have your personal private financial information leave the country—for who knows who to have access to.

The consent disclosure usually looks like just another standard form, something like this:

“Mandatory Internal Revenue Code 7216 Disclosure and Consent. Federal law requires you to obtain client consent to disclose tax return information to third parties for purposes of assembling information, calculations, and processing of various IRS forms.”

Sounds harmless, right?

I mean, there’s no mention of sending your personal information to a third-world country.

But if you sign this, you’re allowing your tax information to be prepared overseas, and most people don’t even realize they’ve agreed to it.

Does this disturb you, or is it just me? Let me know in the comments on the YouTube video.

How to Keep Your Tax Return in the U.S.

If you prefer your tax return to be prepared strictly in the United States, here are some steps you can take to protect your private personal financial information:

1. Ask Directly. When choosing a tax preparer, ask them upfront if any part of your return will be outsourced overseas. If they hesitate or give vague answers, consider going elsewhere.

2. Read Before You Sign. Don’t just skim through paperwork. Look specifically for IRS Form 7216 or any mention of third-party tax preparation.

3. Work with a Trusted CPA. A reputable, local CPA is less likely to offshore your tax return compared to large chains that prioritize cost-cutting.

4. Check for Transparency. If a tax firm is offshoring but openly discloses it, at least you can make an informed decision about whether or not you’re comfortable with that.

5. Monitor Your Identity. Regardless of where your taxes are prepared, identity theft is a real risk. Keep an eye on your credit report and financial accounts.
   
   

Final Thoughts

Look, at the end of the day, it’s your tax return, your personal information, and your privacy. You deserve to know exactly who is handling your data and where it’s going.

So, next time you get your taxes done, ask the question: Is my tax return being prepared overseas?

Final Tip! If you want to make sure your taxes stay in the right hands, work with a tax professional who prioritizes security and transparency.

What do you think about this? Let me know in the comments on the YouTube video!